Subir Roy: End the pay commission business

A pay commission is appointed once in a decade and should look at the entire issue of output expected of an employee and the compensation offered for it. As the role of the government changes, so does this equation. The more market driven the economy becomes, the more its government sector should function in its basics like the rest of the economy. The difference between the public and private sectors in service delivery should not be in efficiency, but pricing (subsidised delivery for the poor). Productivity in service delivery is often difficult to measure and there is a lot of arbitrariness in the private sector as well (whimsical bosses). But there is no question as to which way the system should move.

There being a tradition of selective implementation of recommendations, the latest exercise is likely to take the country no nearer to the goal of having a more accountable government workforce, where individual compensation varies according to performance. It is, therefore, unsurprising that the quality of governance and delivery of public services is appalling and likely to remain so. An accountable workforce under a well-designed management system can make the same resources go a lot further.

Media comment on the recommendations till now has been fairly favourable, as the hike proposed is not as large as the last one and will not undermine fiscal discipline. Therefore, the best that can be said is that the short-term financial impact of the latest recommendations will not be as harmful as the previous one. But that is about it.

Some commentators have said the impact is not much, not even one per cent of gross domestic product (GDP). Now, one per cent of GDP is a lot of money, Rs 1.25 lakh crore for 2014-15 at current prices. A better way of getting a measure of the staffing bill is to ask: How much of what the government earns is spent on its own employees? Expenditure on pay, allowances and pensions in 2012-13 accounted for 32 per cent of the central government’s revenue earnings. There are competing claims to public funding. If you have a rupee more to spend, should it go to employees or should public spending on healthcare, which is appallingly low in India, go up?

Also, the full impact of a pay rise for central government employees will travel far beyond them. Every state government will face pressure from their employees for similar hikes. Panchayat and municipal employees will do likewise. There will also be demands from employees of public sector enterprises for hikes so that they don’t feel worse off than earlier vis-à-vis government employees.

In all this discussion, one section of government employees whose conditions figure very little is temporary or contractual employees engaged in government operations.

In the overall government sector in 2013, out of 28.8 million employees, 57 per cent were permanent/regular and 43 per cent temporary. In the central government, the share of permanent regular civilian employees fell from 94 per cent in 2001 to 88 per cent in 2009. If the number and proportion of temporary employees in government are burgeoning as work is getting increasingly outsourced, then there should be a compensation commission for contractual employees.

If pay commissions cannot bring about systemic changes, then why have them? None other than the chairman of the latest commission himself says you don’t need them. Adjusting salaries for inflation is being done. That leaves us with two issues – government pay vis-a-vis private pay and differentials between different sections of government employees. Determining the former is a matter of perception and even value judgment. I will happily vote for good pay for fire fighters or men in battle, but will look askance at clear non-performers at various levels. It sounds reasonable, as has been suggested, that at senior levels government pay should be 60 per cent of private sector pay. At the driver or clerk level, where productivity is more measurable, it should certainly not be more, as is the case now.

On the latter, the differences between the treatment of different groups of officers (cadres), which is the cause of much acrimony, frustration, demotivation and suboptimal use of talent, makes no sense and is best resolved by abolishing cadres. If a thousand odd are recruited from several hundred thousand, then they must belong to the top half percentile and there cannot be much difference in intelligence quotient between those selected. Besides, the civil service exams are not good at testing what really matters – ability to solve problems and give imaginative leadership. Allotting marks instead of grades is unscientific. Even if the exams were rightly structured, it is absurd to give a section an advantage for a lifetime on the basis of performances in one set of exams. Let all who make it be put in one group and over time progress at different speeds depending on their abilities. The Indian Administrative Service, which has the ear of decision-makers, will not allow this to happen. But the point still needs to be made.

subirkroy@gmail.com